Pukke funds division settled

FTC-IRS deal might mean consumers recoup some money

April 25, 2006|By EILEEN AMBROSE | EILEEN AMBROSE,SUN REPORTER

Consumers are closer to recouping some of their money now that the Federal Trade Commission has reached an agreement with the Internal Revenue Service on how to divide up to $35 million belonging to AmeriDebt Inc.'s founder.

If an agreement had not been reached, consumers might have had to wait for the IRS to be paid tens of millions of dollars before they saw any money, Mark Taylor, Chapter 11 Trustee for AmeriDebt said yesterday. "They've been bumped to the top of the priority pool," he said.

AmeriDebt founder Andris Pukke settled a $172 million FTC lawsuit and a private class action lawsuit in January, the day before the two cases were set to be heard in U.S. District Court in Greenbelt. Pukke, who did not admit to any wrongdoing, agreed to turn over almost all of his assets, potentially up to $35 million.

The IRS, however, had an outstanding claim of nearly $317 million against Pukke. It was unclear at the time of the settlement how that would affect money being returned to consumers.

The settlement between the two federal agencies must still be approved by the court. Under the proposed settlement filed with the court last week, the IRS agreed to accept 30 percent of Pukke's assets with the rest going to about 450,000 consumers represented by the FTC and the private class action lawsuit.

"It is extraordinary that the IRS has agreed to waive some of its [claim]," Taylor said.

Potentially - after legal fees and other costs are paid - more than $20 million could be set aside for consumers, Taylor noted. Although consumers might not be fully compensated, "it's not insignificant," he said.

Taylor roughly estimates that consumers could see $50 to $100 each, depending on the number of affected consumers located.

Without such an agreement, Taylor said, the IRS and the FTC would have likely had a long legal battle over the assets.

Pukke filed a personal bankruptcy last year. Both the IRS and the FTC still will pursue claims against Pukke in that case.

Maryland-based AmeriDebt, once one of the largest credit counseling agencies in the country, was accused of deceiving and overcharging consumers.

Several states and the FTC sued the nonprofit, which closed its doors last year. The IRS has a $15 million claim against the defunct agency. Taylor said he is close to reaching an agreement with the IRS on that claim.